Over $14 Billion Lost to Cryptocurrency Scams in 2021

Over $14 Billion Lost to Cryptocurrency Scams in 2021

In just a single year of 2021, the scammers have managed to steal away $14 billion through cryptocurrency scams. The investigation teams have also confirmed that out of the total cryptocurrency scams, the majority of them were carried out within decentralized finance (DeFi).

One of the major on-chain data analytics firms “Chainalysis” has shared its research surrounding crypto scams and their rise compared to the previous years.

Crypto Scams are On the Rise

Chainalysis has confirmed that compared to the year 2020, a 79% surge has been recorded in scams from cryptocurrencies in the year 2021.

The scammers have come up with different kinds of scamming maneuvers in order to lure innocent cryptocurrency investors. There is a constant rise in the scams and thefts of cryptocurrencies, and the situation is only getting worse.

Chainalysis has confirmed that out of all the maneuvers and tactics, the cryptocurrency scams are on top of the list in 2021. The second major category in the cryptocurrency sector is theft. When it comes to thefts, the majority of the time, it was hackers who hacked cryptocurrency businesses and other businesses for ransomware.

Why DeFi is targeted the Most?

In the entire cryptocurrency sector, it is decentralized finance that has gained the highest amount of adoption. The particular sector offers an ecosystem that is filled with so many cryptocurrencies.

The DeFi sector has proven to be extremely exciting and has been providing opportunities to businesses, entrepreneurs, and individuals alike.

Despite offering so many opportunities, the DeFi technology is also the main cause of so many scams and crimes. The very nature of the DeFi space is being decentralized so no one can pinpoint the exact location of the users or participants.

The DeFi technology does not provide any trail to which country or place a transaction is being sent. The technology even fully hides the identity of the users, making it extremely favorable/advantageous for the investors.

It is because of the very nature of the DeFi space that will continue to cause a huge hindrance to the worldwide (mainstream) adoption of the DeFi sector. Due to this very fact, the decentralized finance sector may never be able to perform at its full potential.

Growth of Decentralized Finance Sector and Crime Rate

The statistics collected by Chainalysis show that the transaction volume for the decentralized finance sector grew by 912% in 2021, compared to the year 2020. It is because of huge gains and returns that most of the investors leaned toward the decentralized finance tokens such as Shiba Inu, Dogecoin, and many more.

The researchers have revealed that in the majority of the hacks, it was the weak code that the hackers were able to bypass and exploit the protocols.

The report has also shown that compared to the year 2020, the theft rate for cryptocurrencies has surged by 516%. To be precise, $3.2 billion were lost to cryptocurrency thefts in the year 2021. Out of the $3.2 billion, around $2.3 billion were lost to decentralized finance protocols. 

Then come cryptocurrency scams that have risen by 82% compared to the year 2020. The stats show that a total of $7.8 billion were lost to cryptocurrency scams.

Out of the total scams, $2.8 billion were lost to rug pulls, where a protocol is launched for the sole purpose of scamming people. Once the investors end up investing money into such protocols, the developers pull the rug and do not let the investors withdraw their money.

Crime Rate for the Year 2021 is Not So High

Although the crime rate in the year 2021 has been high compared to the year 2020, the overall crime rate in the year 2021 has been very meager. For the year 2021, the overall transaction volume for the cryptocurrency industry was worth $15.8 trillion.

Out of such a high volume, only 0.15% of funds were lost to criminal activities for cryptocurrencies.

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